Navigant Research Blog

Airlines, Governments Repel EU Aviation Emissions Plan

Mackinnon Lawrence — January 16, 2013

Source: AirnationThe worldwide commercial aviation industry uses an estimated 70 billion gallons of fuel annually, producing roughly 2% of global greenhouse gas emissions.  Business-as-usual estimates for CO2 emissions from the global aviation industry projected by the International Energy Agency show increases of 3.1% per year over the next 40 years – resulting in a 300% increase in emissions by 2050.  However, the industry has taken significant strides in recent years to stabilize, and ultimately reduce, its contribution to global emissions.

Led by the International Civil Aviation Organization (ICAO), the commercial aviation industry has set two aspirational goals to guide policy: carbon-neutral growth by 2020 and a 50% reduction in industry emissions by 2050.  The integration of aviation biofuels derived from sustainable feedstocks like jatropha, camelina, municipal solid waste (MSW), and algae is a key component of achieving both goals.  Yet, national sovereignty and international agreements on the freedom of the skies are hampering efforts to impose a carbon tax that would encourage the integration of such fuels.

In an effort to compel airlines to implement emissions reduction measures, the EU rolled airline emissions into its Emission Trading Scheme (ETS) in 2008.  Originally scheduled to take effect in 2012, the market-based effort triggered direct opposition from the ICAO, which sought a global solution.  It also led the United States, China, India, Russia, Japan, and some Persian Gulf nations to threaten retaliatory trade measures.

In the United States, the aviation industry spent nearly $5 million in 2012 to support fierce political opposition, culminating in President Obama signing into law the European Union Emissions Trading Scheme Prohibition Act on November 27.  The bill gives the U.S. Transportation Secretary the power to shield U.S.-based carriers from the tax.  This effectively allows U.S. airlines to ignore the EU-imposed tax.

Blackmail, Black Market

Chinese and Indian airlines, meanwhile, refused to submit emissions data as part of the EU scheme.  China also threatened to withhold aircraft orders in excess of $3.8 billion from Airbus if the EU proceeded with the trading scheme.  The Indian government has been a staunch critic of the scheme, arguing that the EU plan would result in the formation of a black market for airline emissions credits.

Facing international pressure from major powers and key trade partners, the EU’s three most powerful members – Germany, the United Kingdom, and France – forced a 1-year postponement of the Airline Amendments to the ETS pending an anticipated agreement on a multilateral global alternative program.   The latter program is scheduled to be negotiated in the ICAO Assembly in 2013.

Although aviation’s contribution to global emissions is not overwhelming, the suspension of the ETS creates an environment of uncertainty around aviation biofuels, potentially stifling investment in drop-in conversion technologies that have yet to cross the commercial threshold.  Lack of long-term policy certainty has routinely been cited by industry sources as a key barrier to biorefinery construction and advanced biofuels scale-up.

Despite opposition to the EU plan, the U.S. government still strongly supports the development of aviation biofuels.  The Federal Aviation Administration (FAA) has called for the aviation industry to use 1 billion gallons of alternative jet fuel per year by 2018.  Moreover, the U.S. Department of Defense remains one of the most enthusiastic proponents of aviation biofuels.  Recent legislation passed by the U.S. Congress has signaled a commitment to public-private partnerships to build out domestic infrastructure for the production of advanced biofuels, including drop-in fuels compatible with existing commercial and military aircraft.

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